Arup Thoughts: Smarter electricity in developing nations

It is revealing that rich nations have progressed slowly in the implementation of smart electricity distribution systems over the last decade.

Sergey Rozhenko, Arup

05/23/2016

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I want to argue that next-generation smart electricity infrastructure will take off in the developing world first because that's where there is a clear business case for them.

However, it is revealing that rich nations have progressed slowly in the implementation of smart electricity distribution systems over the last decade. One of the reasons is the significant upfront cost of installing a real-time data-collection system-advanced metering infrastructure (AMI). The cost of implementing AMI for a region may reach 60 to 100% of the annual power supply costs of that region. In the stable and developed electricity grids of rich nations, upgrades of this type cannot be recovered via increased efficiency savings.

So, my argument ultimately is that low-tech and not properly maintained distribution networks of developing countries, like Latin America or India, would provide the business case to justify these investments.

This is because AMI solves a very real issue faced by energy providers in developing nations: "commercial loss." This is an industry term for a variety of network shortcomings, from "tap-offs" where unregistered users can steal power to physical equipment failures and losses from estimated or inaccurate metering-for some districts, "bad paying" reaches 50 to 70% of total energy generated. AMI can reduce these thefts by up to 50% while building wider acceptance of a reliable, paid-for service. AMI does this by identifying where power is being drawn and where unregistered use might be happening to trigger responses from management.

This way, AMI allows operators in developing economies to cut supply costs by 20 to 30%. The inherent intelligence the technology facilitates also provides confidence to private investors who will help power companies fund the purchase of AMI technology. This leads to the conclusion that the worse a network is today, the better the potential return with AMI installed could be. The technology's ability to promise sustained improvements in billing and earnings from the grid mean adoption is likely to be spear-headed in developing nations.

Converting weakness into opportunity

In Russia, a country that the World Bank says faces "commercial losses" of around 6 to 8% of power generated, two-thirds of the unpaid-for power is lost to outright theft. This is hard to correct and manage in an ageing grid that lacks the intelligence of AMI. Arup's experience in delivering AMI projects in Russia demonstrates that the public-private partnership model is compelling for private investors, who can realize up to 15 or 20% return on investment in AMI. For countries faced with even weaker infrastructure, like Venezuela or Nicaragua, total losses can hit 25% of power generated. The potential gains of using AMI, for investors and end users, are likely to be even greater than in Russia.

Beyond the purely commercial returns of AMI, there are wider benefits to recommending this technology. An electricity network that is fair, reliable, and commercially viable is at the center of a successful society-something we take for granted in the developed world.

By offering SMART grid consultancy services and advising on the necessary software tools and infrastructure, engineers can both empower energy providers and the societies they serve while doing a great and wider service to the developing world.

-Sergey Rozhenko is a member of Arup's energy consulting team in Moscow, responsible for project management and delivery of advisory services in the heat and power sector. This article originally appeared on Arup Thoughts. Arup is a CFE Media content partner.